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This article includes a one-page preview that quickly summarizes the key ideas and provides an overview of how the concepts work in practice along with suggestions for further reading.

A company's competitiveness derives from its core competencies and core products. Core competence is the collective learning in the organization, especially the capacity to coordinate diverse production skills and integrate streams of technologies. First companies must identify core competencies, which provide potential access to a wide variety of markets, make a contribution to the customer benefits of the product, and are difficult for competitors to imitate. Next companies must reorganize to learn from alliances and focus on internal development. McKinsey Award Winner.

learning objective:

To understand how a large company can gain a competitive edge by drawing on its collective knowledge to coordinate its diverse production skills and technologies.

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If you read nothing else, read these 10 articles from HBR's most influential authors: 1) "Meeting the Challenge of Disruptive Change," by Clayton M. Christensen and Michael Overdorf, explains why so few established companies innovate successfully. 2) "Competing on Analytics," by Thomas H. Davenport, explains how to use data-collection technology and analysis to discern what your customers want, how much they're willing to pay, and what keeps them loyal. 3) "Managing Oneself," by Peter F. Drucker, encourages us to carve our own paths by asking questions such as, "What are my strengths?" and "Where do I belong?" 4) "What Makes a Leader?" Not IQ or technical skills, says Daniel Goleman, but emotional intelligence. 5) "Putting the Balanced Scorecard to Work," by Robert S. Kaplan and David P. Norton, includes practical steps and examples from companies that use the balanced scorecard to measure performance and set strategy. 6) "Innovation: The Classic Traps," by Rosabeth Moss Kanter, advocates applying lessons from past failures to your innovation efforts. She explores four problems and offers remedies for each. 7) "Leading Change: Why Transformation Efforts Fail," by John P. Kotter, argues that transformation is a process, not an event. It takes years, not weeks, and you can't skip any steps. 8) "Marketing Myopia," by Theodore Levitt, introduces the quintessential strategy question, "What business are you really in?" 9) "What Is Strategy?" by Michael E. Porter, argues that rivals can easily copy your operational effectiveness, but they can't copy your strategic positioning-what distinguishes you from all the rest. 10) "The Core Competence of the Corporation," by C.K. Prahalad and Gary Hamel, argues that a diversified company is like a tree: the trunk and major limbs its core products, branches its business units, leaves and fruit its end products. Nourishing and stabilizing everything is the root system: its core competencies.

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When companies pursue sustainability, it's usually to demonstrate that they are socially responsible. They expect that the endeavor will add to their costs, deliver no immediate financial benefits, and quite possibly erode their competitiveness. Meanwhile, policy makers and activists argue that it will take tougher regulations and educated, organized consumers to force businesses to adopt sustainable practices. But, say the authors, the quest for sustainability can unearth a mother lode of organizational and technological innovations that yield both top-line and bottom-line returns. That quest has already begun to transform the competitive landscape, as companies redesign products, technologies, processes, and business models. By equating sustainability with innovation today, enterprises can lay the groundwork that will put them in the lead when the recession ends. Nidumolu, Prahalad, and Rangaswami have found that companies on the journey to sustainability go through five distinct stages of change: (1) viewing compliance as opportunity; (2) making value chains sustainable; (3) designing sustainable products and services; (4) developing new business models; and (5) creating next-practice platforms. The authors outline the challenges that each stage entails and the capabilities needed to tackle them.

This HBR Spotlight article offers a framework for determining your company's green opportunities and an overview of what other organizations are doing with clean energy technologies and recycling programs.

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Affordability and sustainability, not premium pricing and abundance, are the new tenets of effective innovation. Westerners are struggling with the shift in mind-set, but a few emerging-market pioneers are showing the way: They're designing inexpensive products and manufacturing them with so little capital and on a scale so vast that their prices-1 cent for a one-minute telephone call, $2,000 for a car-are the lowest in the world. Nowhere is this approach, which the authors call "Gandhian innovation," more evident than in India. Smart companies have used it to penetrate the country's burgeoning mass market. This article provides a framework to help executives understand three types of Gandhian innovation that have brought corporations success: disrupting business models, as Bharti Airtel did when it shifted its focus from average revenue per user to gross profit and expanded its market reach; modifying existing business capabilities, as Computational Research Laboratories did when it came up with a whole new supercomputer design that used standard components; and creating or sourcing new capabilities, as Lupin did when it reversed the usual drug development process to create an affordable treatment for psoriasis.

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Since 1922, Harvard Business Review has been a leading source of breakthrough ideas in management practice. The Harvard Business Review Classics series now offers you the opportunity to make these seminal pieces a part of your permanent management library. Each highly readable volume contains a groundbreaking idea that continues to shape best practices and inspire countless managers around the world.

In this article, renowned management experts Gary Hamel and C. K. Prahalad introduce their approach to strategic planning in the face of tough competition. With advice on tailoring your company's strategy and developing the will to win within your firm, this article helps you define a long-term strategy for your organization that captures employees' imaginations and creates a clear path to success.

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Successful enterprises create and adhere to distinct business ideologies-such as the Toyota Way and the Xerox Way-over time. These doctrines contain specific ideas about how to compete, performance measures, organization structures, and whom to reward. Every employee knows: That's the way we do things here. The problem is that those success factors turn into entrenched orthodoxies over time, and no one challenges them. That's why during a corporate transformation, the forgetting curve is sometimes more important than the learning curve.

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Benchmarking best practices allows enterprises to catch up with the competition, but it won't turn them into market leaders. Organizations become winners by spotting big opportunities and inventing next practices. Executives can unearth opportunities by identifying big problems that their companies will benefit by tackling. They must ask six questions: (1) Is the problem widely recognized? (2) Does it affect other industries? (3) Are radical innovations needed to tackle the problem? (4) Can tackling it change the industry's economics? (5) Will addressing the issue create a fresh source of competitive advantage? (6) Would tackling this problem prove to be a big opportunity for us?

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For the past 33 years, Prahalad, a professor of strategy at the University of Michigan's Ross School of Business, has ended all his MBA and executive education courses with an exhortation: Managers must remember that they are the custodians of society's most powerful institutions, and as such they must hold themselves to a higher standard. They must strive to achieve success with responsibility. He offers 11 specific pieces of advice intended to spur his listeners to reexamine their values before plunging into everyday routines. Among them are 1) Display a commitment to learning and developing yourself. 2) Put personal performance in perspective. 3) Realize the importance of loyalty to organization, profession, community, society, and, above all, family.

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This article includes a one-page preview that quickly summarizes the key ideas and provides an overview of how the concepts work in practice along with suggestions for further reading.

Moving beyond decades of mutual distrust and animosity, corporations and nongovernmental organizations (NGOs) are learning to cooperate with each other. Realizing that their interests are converging, the two sides are working together to create innovative business models that are helping to grow new markets and accelerate the eradication of poverty. The path to convergence has proceeded in three stages. In the initial be- responsible stage, companies and NGOs, realizing that they had to coexist, started to look for ways to influence each other through joint social responsibility projects. This experience paved the way for the get-into-business stage, in which NGOs and companies sought to serve the poor by setting up successful businesses. In the process, NGOs learned business discipline from the private sector, while corporations gained an appreciation for the local knowledge, low-cost business models, and community-based marketing techniques that the NGOs have mastered. Increased success on both sides has laid the foundation for the cocreate-business stage, in which companies and NGOs become key parts of each other's capacity to deliver value. When BP sought to market a duel-fuel portable stove in India, it set up one such cocreation system with three Indian NGOs. The system allowed BP to bring the innovative stove to a geographically dispersed market through myriad local distributors without incurring distribution costs so high that the product would become unaffordable. The company sold its stoves profitably, the NGOs gained access to a lucrative revenue stream that could fund other projects, and consumers got more than the ability to sit down to a hot meal--they got the opportunity to earn incomes as the local distributors and thus to gain economic and social influence.

learning objective:

To see how business executives and social activists can better achieve their respective aims by collaborating in specific ways.

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Who will invent the industries of the future? Who will transform the industries of today? Framed by insightful commentary by Gary Hamel and C.K. Prahalad, this video tells the story of Swatch, which recaptured dominance of the world watch industry by transforming the industry itself.

learning objective:

To discuss competitive strategy and how senior managers must look to the future to shape their companies and industries in the years to come.

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